My Crazy Method of Determining Property Value for Net Worth Calculations
This is the second installment in my net worth series. In the last post you learned why I think your net worth is the holy grail of all personal financial numbers. In that post I promised you that I would share details on how I calculate my net worth and then begin to publish my net worth going forward.
But before I reveal my details, I want to first talk about property values and how they factor into your net worth. I think this is one of the most critical aspects of planning and if you use my method, you’ll give yourself the gift of financial peace of mind.
Here’s a short video I created to help illustrate my method.
In this video I focus on the following:
- Property values ALWAYS fluctuate. That means they never just go up.
- Carrying your home at a value consistent with the current market jacks up your net worth and puts you at risk for over valuing your property.
- The conservative approach is to carry your home value at a number reflecting the LOWEST value it has been estimated to be over the last 10 years.
- If you were forced to sell your home during a downturn in the market, you wouldn’t be caught off guard.
How to Find that Number
Figuring out your property’s lowest 10-year value is easy (see a demonstration in the video). Here’s how:
- Go to Zillow.com.
- Enter your property address.
- Click the link for your property to open the listing page.
- Scroll down to the Zestimate section and choose the 10-year history graph.
- Run your cursor along the property value line to find the lowest estimated value.
- Use that figure!
What’s Your Strategy?
My way is just one way. Some people don’t count their property value at all because they figure they’ll always need a place to live and they can’t “withdrawal” from that asset for living expenses. I consider the value of my home to be my long-term care insurance. If a time comes when I am not able to care for myself, I can sell my home and use that asset for my care.
What about you, how do you factor your home into your net worth? I’d love to hear your thoughts and ideas in the comments below.
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